Is the direct method still used in the statement of cash flows? The direct method is one of two methods allowed for preparing the statement of cash flows (or cash flow statement). The direct method is recommended by the...
Is the direct method still used in the statement of cash flows? The direct method is one of two methods allowed for preparing the statement of cash flows (or cash flow statement). The direct method is recommended by the...
What is the effect on financial ratios when using LIFO instead of FIFO? Definition of Effect of LIFO Instead of FIFO During periods of significantly increasing costs, the LIFO cost flow assumption instead of the FIFO...
Where is the discount on the purchase of office furniture recorded? Definition of Discount on Purchase of Office Furniture The discount on the purchase of office furniture that will be used by a company (as opposed to...
How is petty cash reported on the financial statements? Definition of Petty Cash Petty Cash is a small amount of money that a company has available to pay small amounts without writing a company check. The money might be...
What does current portion of long term debt mean? Definition of Current Portion of Long-Term Debt The current portion of long-term debt is the amount of principal that will be due within one year of the date of the...
Why do you separate current liabilities from long-term liabilities? Definition of Current Liabilities and Long-term Liabilities Generally, current liabilities are a company’s obligations that are due within one year of...
How can I determine the difference in earnings from using LIFO instead of FIFO? The difference in a corporation’s earnings from using LIFO instead of FIFO can be determined by the amounts reported in the balance sheet...
I don't understand the conservatism principle. Why do losses get recorded but not gains? Conservatism has to do with uncertainty. When uncertainty exists between two alternatives that appear to be reasonable, the...
Is the sales tax on merchandise purchased for resale included in inventory? In our state, sales tax is paid only by the end customer. In other words, a retailer does not pay sales tax on merchandise that is purchased for...
Financial Statements Video Training Part 12 Statement of cash flows: introduction, cash flows from operating activities Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your...
Where is treasury stock reported on the balance sheet? Under the cost method of recording treasury stock, the cost of treasury stock is reported at the end of the Stockholders’ Equity section of the balance sheet....
Where do preferred stocks go on the P&L? The amount received from issuing preferred stock is reported on the balance sheet within the stockholders’ equity section. Only the annual preferred dividend is reported on the...
Where is the premium or discount on bonds payable presented on the balance sheet? Definition of Premium or Discount on Bonds Payable The premium or discount on bonds payable is the difference between the amount received...
What does the direct labor efficiency variance tell us? This variance tells us how efficient the direct labor was in making the actual output that was produced by the direct labor. The direct labor efficiency variance...
What does it mean to report expenses by function? Definition of Reporting Expenses by Function Reporting expenses by function means to classify and report expenses according to the type of activity for which the expenses...
Where do worker compensation insurance costs get reported on the financial statements? Worker compensation insurance costs (also referred to as worker comp) should appear on the income statement and also on the balance...
How do I determine the cost of missing inventory? Definition of Determining the Cost of Missing Inventory The approximate cost of missing inventory is the difference between 1) the cost of the inventory items that are...
Where can I get official information for federal payroll taxes? For official information on federal payroll taxes we recommend the Internal Revenue Service Publication 15 which is known by two names: Circular E and...
How can I determine the inventory methods used by other companies in my industry? Definition of Inventory Methods Inventory methods refers to the order or manner in which a company moves its actual costs out of the...
How should the sale of gift certificates be recorded in the general ledger? Definition of Gift Certificates Gift certificates (and gift cards) are often sold by a retailer to a buyer for cash. The buyer can then redeem...
What is the discounted value of expected net receipts? Let’s first define expected net receipts. These are future receipts after deducting any related payments. For example, if you are likely to receive $1,200 one year...
What is the book value per share of stock? Definition of Book Value per Share of Stock The book value of a corporation is the amount of its stockholders’ equity. Assuming the corporation does not have preferred stock...
Why Does Inventory Get Reported on Some Income Statements? Reporting of Inventory on Financial Statements Inventory is an asset and its ending balance is reported in the current asset section of a company’s balance...
Where can I find financial ratios for my industry? One source for financial ratios by industry is the RMA Annual Statement Studies Financial Ratio Benchmarks. RMA is the acronym for Risk Management Association and...
With regard to depreciation, what does the term mid-month convention mean? Definition of Mid-Month Convention In depreciation, the mid-month convention means that an asset placed into service anytime during a given...
What does it mean to replenish the petty cash fund? Definition of Replenishing Petty Cash Replenishing the petty cash fund means the petty cash custodian requests and receives cash from the company’s regular checking...
How do you calculate Return on Capital Employed (ROCE)? Return on capital employed is used as a measurement of the performance of a division of a company. It assumes that the division is not responsible for its financing...
When calculating inventory turnover, do you use sales or the cost of goods sold? I calculate the inventory turnover by using the cost of goods sold. I use the cost of goods sold because inventory is in the general ledger...
Does sales commission get reported in the income statement? Definition of Sales Commissions Sales commissions are amounts earned by selling another company’s goods or services and paid by the company whose goods or...
Why not use Sales in the Inventory Turnover Ratio? The short answer is: Because Inventory is at cost. Inventory is not on the company’s books at selling prices. The Inventory Turnover Ratio is Cost of Goods Sold...
How do you calculate the cost of carrying inventory? Definition of Cost of Carrying Inventory The cost of carrying inventory (or cost of holding inventory) is the sum of the following: Cost of money tied up in inventory,...
How do I calculate depreciation using the sum of the years' digits? Definition of the Sum-of-the-Years’-Digits Depreciation The sum-of-the-years’-digits depreciation (SYD depreciation) is one method for calculating...
What is the purpose of the cash flow statement? Definition of Cash Flow Statement The cash flow statement or statement of cash flows or SCF identifies a company’s major cash inflows and outflows that occurred the same...
How do I compute the product cost per unit? Definition of Product Cost per Unit In accounting, a product’s cost is defined as the direct material, direct labor, and manufacturing overhead. Other costs such as...
Bookkeeping Video Training Part 6 Adjusting entries: recorded in the general journal, deferral of prepaid expenses Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your...
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